Dual agency is when the same Real Estate Agent represents both the buyer and the seller. In Illinois, this arrangement is perfectly legal, and it is just a check-box on Section 29 of the Multiboard 7.0 Contract. These arrangements can be a nice opportunity fo both an investor and for a Realtor. Oftentimes the property is conveyed without ever being listed for sale. This can help the seller exit her position and help the buyer save money. But, what can these parties ask their attorneys to do? Read along and find out!
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Proper Disclosure of Dual Agency
Yes, I have to start here. This is a law blog. If you are going to participate in this type of agreement, your Realtor needs to tell you about everything that could go wrong. You have to have an hour long conversation about conflicts of interest. You’ll then receive something in writing about everything you talked about. Then, your Realtor will tell you to hire your own lawyer. This experience is really off-putting, but it is necessary. You must know that you are always talking to the other person’s Realtor when you call your own Realtor. This is all very necessary for your protection as a consumer of professional services. Now that I’ve told you all about that, let’s talk about whether or not it’s a good idea to jump into a dual agency agreement with your Realtor.
Why You Shouldn’t Do Dual Agency in 2 Words
No advice. If you are represented by a Realtor in a dual agency agreement, that Realtor cannot help you negotiate for a better deal. That Realtor cannot tell you where the Seller’s break-even point is located. Nor can she tell the Buyer to play hardball because the property is not moving. If there is a dual agency agreement, the Realtor can give no advice to either party on how to proceed with the sale.
This is why, if you are doing a dual agency agreement in Chicago, you need a great attorney. We see this most commonly with condominiums, and honestly, this happened to me when I moved into my first real place! Sometimes, the Realtor does such a great job marketing the home for the seller that the buyer comes in off the advertisement. Then, what is the Buyer to do, because the Buyer has every reason to think the Realtor represents her! This is where the lawyer has to come in and solve problems.
We really enjoy doing these types of transactions. They allow me to improve my relationship with a Realtor while making a new client. When we see these properties, we know not to try an adversarial negotiation, but rather to collaborate. Before we all worked from home, I used to have the parties meet at my office on a weekly basis in some transactions. The truth is, as long as a good professional looks over your contract, any errors will quickly show themselves.
Why You Should Do It in 2 Words
Cost Savings! If you are considering dual agency, you must know that the cost savings can be tremendous. Particularly, if you are in an investment or rehab scenario, dual agency cost savings can be the entire margin! Just last month I had a property in a dual agency transaction where the cost savings was $12,000 from the arrangement alone! You save a lot by sharing a team.
Dual Agency agreements subtly save money for the seller. Frequently, when the Realtor knows she will be paid both sides of the commission, she is happy to take a small reduction in fees. Predictably, this is due to the ease of communication these agreements lends themselves toward. Your Realtor will do less work than two transactions in a dual agency agreement. So, she should take less than double her usual fees. If you have a dual agency agreement, seek savings by asking for a commission cut.
Moreover, dual agency helps the buyer save money as well. While we think of the cost of real estate being a fixed value, this just is not the case. Many real estate sales have a wide range of offers coming from all sorts of competition looking to buy. In these cases, dual agency is a benefit for the buyer. With access to the Seller’s Realtor, she might get access to a property off-market. So, this means nobody else could bid on it. With no competition, the price will naturally fall lower. Then, she might get a great deal as long as she does her proper due diligence.
Dual Agency will always be a trade-off of risk and savings. While dual agency agreements allow buyers and sellers to save money and better project costs, both parties will never truly get the maximum benefit they would in an adversarial transaction. If you are going through a dual agency sale, a competent attorney, like myself, can help make sure you get the most out of it. No matter what, we’re always going the extra mile for our clients.